A SECURE 2.0 summary of provisions, purpose, and timing
Most of us in the retirement plan business spent 2022 waiting for what we affectionately call SECURE 2.0 to pass and to see what it would contain. SECURE 2.0 Act of 2022 was finally signed into law on December 29, giving us all plenty of reading to do over the new year. This new legislation includes policy changes that will affect both the administrators of and participants in DC plans, DB plans, and IRAs. We’ve put together a guide to help you navigate the provisions that may matter most to you.
SECURE 2.0 has a little something for everyone
Continuing the work begun by the Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act), SECURE 2.0 Act (SECURE 2.0) clarifies some of the content of the original legislation and also expands into new territory. An early version of the bill stated its purpose as “an act to increase retirement savings, simplify and clarify retirement plan rules, and for other purposes.” SECURE 2.0 approaches those goals from a few different angles, making some effective retroactively and phasing others in over time.
Find what matters to you in SECURE 2.0
Because the legislation is so expansive, we’ve put together a brief guide of the different types of provisions retirement plan professionals might be interested in, as well as a timeline of the provisions by effective date. Although the list we’ve created isn’t an exhaustive accounting of the entire legislation, we hope it will provide you with a quick resource to find some of the provisions you’re most interested in learning more about. Expand each heading for a list of pertinent provisions.
Provisions that make it easier for employers to offer a plan
- Section 102 Modification of credit for small employer pension start-up costs
- Section 111 Application of credit for small employer pension plan start-up costs to employers that join an existing plan
- Section 121 New starter 401(k) plan
- Section 332 SIMPLE IRA plans can be replaced with a safe harbor 401(k) plan midyear
- Section 348 Cash balance
Provisions that make it easier for sponsors to administer a plan
- Section 301 Employee Plans Compliance Resolution System (EPCRS) overpayment recovery
- Section 304 Updating dollar limits for mandatory distributions
- Section 305 EPCRS expansion
- Section 316 Retroactive amendment that increases benefits
- Section 320 Simplified requirements for unenrolled participants
- Section 341 Annual notice consolidation
- Section 345 Annual audits for a group of plans
- Section 350 Safe harbor for correcting elective deferral failures
Provisions that can help people improve their financial outcomes
- Section 101 Mandatory automatic enrollment
- Sections 103 and 104 Saver’s Credit and promotion of Saver’s Credit
- Section 107 Increased RMD age
- Section 109 Higher catch-up limit to apply at ages 60 to 63
- Section 110 Matching of student loan payments
- Section 113 Small immediate financial incentives for contributing to a plan
- Sections 116 and 117 Additional nonelective contributions and increased deferral limits permitted in SIMPLE plans
- Section 120 Exemption for certain auto-portability transactions
- Section 125 Reduced service requirement for long-term, part-time employees
- Section 126 Rollovers from 529 plans to Roth IRAs
- Section 127 Emergency savings accounts linked to individual account plans
- Section 302 Reduction in excise tax on certain accumulations in qualified retirement plans
- Section 311 Clarification of repayment of qualified birth or adoption distribution
- Section 325 Exemption of pre-death RMDs from Roth accounts
- Section 327 Surviving spouse treated as the employee
- Section 332 SIMPLE IRA plans can be replaced with a safe harbor 401(k) plan midyear
- Section 603 Catch-up contributions must be made on a Roth basis
- Section 604 Optional treatment of employer matching or nonelective contributions as Roth contributions
Provisions that provide participants easier and broader access to their savings
- Section 115 Withdrawals for certain emergency expenses
- Section 127 Emergency savings accounts linked to individual account plans
- Section 311 Clarification of repayment of qualified birth or adoption distribution
- Section 312 Hardship withdrawal certification
- Section 314 Penalty-free withdrawals for domestic abuse victims
- Section 326 Withdrawals for individuals with a terminal illness
- Section 331 Withdrawal for federally declared disasters
Provisions for defined benefit plans
- Section 343 DB annual funding notice
- Section 342 DB lump-sum windows
- Section 349 Termination of variable premium indexing for DB plans
- Section 348 Cash balance
- Section 338 Requirement to provide paper statements in certain cases
Timing and effective dates are critical for plan fiduciaries to understand
The provisions each come with their own effective dates, which may refer to calendar years, tax years, or plan years. But generally, by expanding the dates below, you can see which provisions fall into each timeframe.
These provisions are in effect now
- Section 107 Increased RMD age
- Section 113 Small immediate financial incentives for contributing to a plan
- Section 301 EPCRS overpayment recovery
- Section 302 Reduction in excise tax on certain accumulations in qualified retirement plans
- Section 311 Repayment of qualified birth or adoption distribution limited to three years
- Section 312 Hardship withdrawal certification
- Section 320 Simplified requirements for unenrolled participants
- Section 326 Exception to penalty on early distributions from qualified plans for individuals with a terminal illness
- Section 331 Withdrawal for federally declared disasters
- Section 345 Annual audits for a group of plans
- Section 348 Cash balance
- Section 349 Termination of variable premium indexing for DB plans
- Section 604 Optional treatment of employer matching or nonelective contributions as Roth contributions
- Sections 102 and 111 Modification of credit for small employer pension start-up costs
These provisions become effective between December 29, 2023, and December 31, 2024
- Section 110 Treatment of student loan payments as elective deferrals for purposes of matching contributions
- Section 115 Withdrawals for certain emergency expenses
- Section 120 Exemption for certain auto-portability transactions
- Section 121 New starter 401(k) plan
- Section 126 Rollovers from 529 plans to Roth IRAs
- Section 127 Emergency savings accounts linked to individual account plans
- Section 303 Retirement Savings Lost and Found
- Section 304 Updating dollar limits for mandatory distributions
- Section 305 EPCRS expansion
- Section 310 Exemption of otherwise excludable employees from top-heavy minimum contributions
- Section 314 Penalty-free withdrawals for domestic abuse victims
- Section 315 Modification to family attribution rules
- Section 316 Retroactive amendment that increases benefits
- Section 325 Exemption of pre-death RMDs from Roth accounts
- Section 327 Surviving spouse treated as the employee
- Section 332 SIMPLE IRA plans can be replaced with a safe harbor 401(k) plan midyear
- Section 341 Annual notice consolidation
- Section 342 DB lump-sum windows
- Section 350 Safe harbor for correcting elective deferral failures
- Section 603 Catch-up contributions must be made on a Roth basis
- Sections 116 and 117 Additional nonelective contributions and increased deferral limits permitted in SIMPLE plans
SECURE 2.0 welcomes some new elements to retirement plans
As you can see, SECURE 2.0 uses a wide range of plan rules and features to effect its changes. Some of the elements it relies on commonly show up in retirement plan legislation—such as tax credits, RMDs, and Roth. But SECURE 2.0 has also added (or clarified) some welcome new elements to the retirement savings discussion, such as student loan debt and emergency savings, recognizing the reality that Americans of all ages face in saving for retirement.
Plan amendments related to SECURE 2.0 provisions are due by the last day of the first plan year beginning on or after January 1, 2025, or such later date as the secretary of the Treasury may prescribe. As with any new legislation, there are many questions that need to be answered, and guidance or relief will be needed for certain provisions. We look forward to seeing what those have in store, as well.
For more information about SECURE 2.0, please see our Getting to know SECURE 2.0 Act resource page.
Important disclosures
The content of this document is for general information only and is believed to be accurate and reliable as of the posting date, but may be subject to change. It is not intended to provide investment, tax, plan design, or legal advice (unless otherwise indicated). Please consult your own independent advisor as to any investment, tax, or legal statements made.
This material does not constitute tax, legal, or accounting advice, and neither John Hancock nor any of its agents, employees, or registered representatives are in the business of offering such advice. It was not intended or written for use, and cannot be used, by any taxpayer for the purpose of avoiding any IRS penalty. It was written to support the marketing of the transactions or topics it addresses. Anyone interested in these transactions or topics should seek advice based on his or her particular circumstances from independent professional advisors.
John Hancock Retirement Plan Services LLC offers administrative and/or recordkeeping services to sponsors and administrators of retirement plans. John Hancock Trust Company LLC provides trust and custodial services to such plans. Group annuity contracts and recordkeeping agreements are issued by John Hancock Life Insurance Company (U.S.A.), Boston, MA (not licensed in NY), and John Hancock Life Insurance Company of New York, Valhalla, NY. Product features and availability may differ by state. Securities are offered through John Hancock Distributors LLC, member FINRA, SIPC.
John Hancock Investment Management Distributors LLC is the principal underwriter and wholesale distribution broker-dealer for the John Hancock mutual funds, member FINRA, SIPC.
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